Question of the Day

Whose side of the story do you believe?

MONTGOMERY, Ala. (AP) - Joe Garrett is proof anyone can fall victim to tax identity theft: he works for the Alabama Department of Revenue as a deputy commissioner.

A month before tax day, Garrett - whose job at the state Department of Revenue entails tax policy and fraud - arrived home from work to find an unexpected letter from his employer asking him to confirm his identity for his 2014 tax return. But there was a problem: Garrett hadn’t filed a return yet.

At work the next day he learned someone had fraudulently filed both state and federal income tax returns in his name. At first, it seemed like a joke by a state tax official, but Garrett began to follow the money.

Thanks to the nature of his work and experience, Garrett - a lawyer and former tax consultant - knew the steps to take and began going through the motions. Along the way he learned firsthand how many hands tax refunds pass through to get from government to resident.

In his own case, Garrett’s federal refund was sent from the U.S. Treasury to Santa Barbara Tax Products Group, an affiliate of a prepaid debit card issuer called the Green Dot Corp. At that time, processing fees from Turbo Tax and Intuit were taken out. The remaining amount was then refunded to an account through a J.P. Morgan Chase & Co. routing number, but the bank told Garrett it was just a clearinghouse that handled transactions and didn’t own or control the account.

Around $5,000 of Garrett’s $7,000 federal refund was placed on a reloadable debit card through RushCard. That part was easy to stop, almost like reversing a bad check.

However the other $2,000 went to an Amazon gift card, which nobody was able to get back.

If there’s something to blame in his saga, Garrett said, it’s the reloadable gift cards. The anonymity they allow makes them less secure to fraud then the usual verification required with standard bank-issued credit and debit cards.

“The one thing I would point the finger at is those reloadable debit cards,” Garrett said. “I think they’re being abused.”

Each year the Alabama Department of Revenue stops thousands of fraudulent tax returns. Garrett said it’s difficult to know the exact amount, but whatever the number is, it has grown in recent years.

According to the IRS, nationwide efforts to combat identity theft stopped 19 million suspicious returns between 2011 and 2014 and protected $63 billion in fraudulent refunds.

The agency said it initiated 1,063 criminal investigations related to identity theft in fiscal year 2014. Average jail time for those convicted was 43 months, a five-month increase from 2013.

Since it began in 2012, the IRS Identity Theft Clearinghouse has received more than 7,600 individual theft leads involving 1.47 million returns with over $6.8 billion in refunds claimed.

Garrett said Alabama’s revenue department receives around 1.2 million refund requests each year and issues refunds totaling between $500 million and $600 million. If even just 1 to 3 percent of those are fraudulent, that’s $15 million and $20 million in state losses.

“Even if it’s that much, that’s a lot,” he said.

Alabama’s revenue department has a number of measures to screen identities but Garrett hopes his own 2014 difficulties will encourage others to take identity theft more seriously.

In fact, it was from one of those measures that Garrett learned of his own theft. In February, several states including Alabama told TurboTax they were seeing a higher number of suspicious filings, prompting the company to temporarily pause e-filing for 24 hours.

The Alabama Department of Revenue had flagged thousands of suspicious filings, sending letters to the addresses attached to each for verification. That’s when Garrett got his mail.

Since talking about his own situation, a number of people have told Garrett they’ve also been victims of tax identity theft. Two people from his department, two tax attorneys he works with, and an employee of a state government organization in Washington, D.C., all told him similar stories.

“They all said, ‘Hey this happened to me, too,’” he said.

Garrett finally filed his own real returns a few days before the deadline. Because of the fraud, he had to file a paper version, along with an ID theft affidavit and some other documents.

Garrett said there’s at least one thing taxpayers can do to protect themselves: file early.